Five Trends That Challenge Technology Offshoring

IBM is an international company that happens to have its HQ in the United States. After this latest round of outsourcing, the WSJ reports that 70% of the company's employees will be located outside the U.S. Having your job get shipped overseas sucks and having it shipped away in a cruddy economy is a double whammy, but calling for boycotts or trying to legislate job security is not going to work. That horse is already out of the barn. Tech vendors will put jobs where they can get an acceptable (note, not necessarily the best) work done at the lowest rate.

All that said, I think there are five trends that suggest those big outsourcing waves will wane.

• The delta between salary costs is narrowing. Salaries for tech proficient workers in India are moving up and salaries in the U.S. are stagnant or moving down. At some point it is simply not worth the hassle in time zones and culture differences to move the work offshore. Note, this is probably not true for the big financial institutions that are in such terrible shape they want to move as many salaried costs off their books as possible in exchange for contract work. But the financial companies are floundering around looking for any quick fix rather than a long term strategy.
  
• Technology advances are the biggest challenge to contract offshoring. Much of that offshore work is for business applications. But when you can deploy, say an Oracle virtual business application, in the cloud at one mouse click, the whole offshore development equation gets changed. Once you start exchanging physical, hand coding for digital virtualized software distribution, you are in a new world.
  
• Those outsourced workers can become the next competitors much more easily. If you are a skilled software developer, you can rent your servers via Amazon and make an end run around the costs that used to associated with tech startups.
  
• Social networks are in place for new companies to connnect and find work. This is just starting to form, but onshore contractors are going to find it much easier to find and bid for work.
  
• The current domestic stimulus packages favors onshore industry. Education spending includes technology spending, but education is still very much an in-person business. Health care spending, same thing. Infrastructure spending will almost by definition take place in the U.S.

Look, there will still be plenty of work going offshore. In fact the big dollar contracts from the financial companies may skew the chart even more towards offshore. But underneath the covers are five trends that make me think offshoring may not be the automatic solution it was once seen.

This article was originally posted by Computerworld and is the property of Computerworld Inc.